If you're a representative payee for a child receiving SSI and they've been awarded a large back payment, you'll need to open something called a "dedicated account." This isn't optional—Social Security requires it by law for certain lump sum payments. Understanding how dedicated accounts work and how to set one up correctly is essential for protecting your child's benefits.
In this article, we'll cover:
- What a dedicated account is and who needs one
- When Social Security requires a dedicated account
- What you can and cannot spend dedicated account funds on
- Step-by-step instructions for opening a dedicated account in 2026
- How dedicated accounts affect the SSI resource limit
- Record-keeping requirements for dedicated accounts
What Is a Dedicated Account?
A dedicated account is a special savings account that holds certain large SSI payments for children under 18 (or under 22 if a student). It's separate from the regular representative payee account you use for monthly benefits. The purpose is to ensure that large lump sum payments are used specifically for the child's disability-related needs rather than being spent on everyday expenses.
The key difference between a dedicated account and a regular rep payee account is how the money can be spent. Funds in a dedicated account are restricted to specific categories directly related to the child's disability, education, or future needs. You can't use dedicated account money for routine expenses like food or rent, even though those are normally allowable uses of SSI benefits.
When Does Social Security Require a Dedicated Account?
Social Security requires a dedicated account when a child receives a past-due SSI payment that exceeds three times the maximum monthly federal benefit rate. In 2026, with the maximum federal SSI payment at $967 per month, any back payment exceeding approximately $2,901 triggers the dedicated account requirement.
These large payments typically occur when there's been a long delay in processing an initial SSI application, when benefits are reinstated after a period of suspension, or when an underpayment is corrected going back many months. If your child receives a lump sum that meets the threshold, Social Security will notify you that a dedicated account is required and give you a deadline to set one up.
Not every back payment requires a dedicated account. If the lump sum is smaller than the three-month threshold, you can deposit it into the regular representative payee account. However, for SSI recipients, you'll still need to be mindful of the $2,000 resource limit and may need to spend down the funds appropriately.
What Can You Spend Dedicated Account Funds On?
Dedicated account funds can only be used for expenses related to the child's impairment or disability. This includes medical treatment and related expenses not covered by insurance or Medicaid, education and job training costs, therapy services such as physical therapy, occupational therapy, or speech therapy, personal needs assistance, special equipment or assistive technology, and housing modifications if needed for the disability.
Funds can also be used for certain future needs planning, though the rules here can get complex. If you're unsure whether a particular expense qualifies, it's worth contacting Social Security or consulting with a benefits counselor before making the purchase.
You cannot use dedicated account funds for regular living expenses like food, clothing, or rent—even though these are normally allowable uses of monthly SSI payments. The idea is that monthly benefits cover ongoing needs, while dedicated account funds address disability-specific expenses that might otherwise go unmet.
Step-by-Step: Opening a Dedicated Account
Step 1: Wait for Social Security's notice. When your child receives a qualifying back payment, Social Security will send a notice explaining that a dedicated account is required. This notice will specify the amount that must go into the dedicated account and give you a timeframe for compliance.
Step 2: Choose a financial institution. The dedicated account must be a savings account at a bank or credit union. It cannot be a checking account, and it cannot be the same account you use for the child's monthly benefits. Call ahead to make sure the bank can title the account correctly as a dedicated account.
Step 3: Gather your documents. You'll need your representative payee appointment letter, the Social Security notice requiring the dedicated account, your ID, and the child's Social Security number. Some banks may ask for additional documentation.
Step 4: Open the account with proper titling. The account must be titled to show it's a dedicated account for SSI benefits. A typical format is "Your Name, representative payee for Child's Name, Dedicated Account." Make sure the bank includes this designation, as it affects how the account is treated for resource purposes.
Step 5: Deposit the required amount. Transfer or deposit the amount specified by Social Security into the dedicated account. Keep records of this initial deposit, as you may need to document it later.
Step 6: Notify Social Security. Once the account is open, you may need to provide Social Security with the account information. Check your notice for specific instructions on reporting the new account.
How Dedicated Accounts Affect the Resource Limit
Here's the good news: funds properly held in a dedicated account are excluded from SSI's $2,000 resource limit. This is a significant protection, because a large back payment would otherwise immediately disqualify the child from continuing benefits.
However, this exclusion only applies while the money remains in the dedicated account. Once you withdraw funds—even for allowable expenses—the money is no longer excluded. If you withdraw more than you immediately spend, the excess could count as a resource. This is why it's important to only withdraw dedicated account funds when you have a specific qualifying expense to pay for.
Interest earned on the dedicated account is also excluded from resources as long as it stays in the account. This makes dedicated accounts one of the few places where SSI recipients can safely accumulate funds without jeopardizing their benefits.
Record-Keeping Requirements
Social Security requires representative payees to keep careful records of dedicated account spending. For each withdrawal, you should document the date and amount withdrawn, what the money was spent on, how the expense relates to the child's disability, and receipts or invoices for the purchases.
Keep these records indefinitely, as Social Security may ask for an accounting at any time. You'll also report dedicated account spending on your annual Representative Payee Report, separate from regular benefit spending.
If Social Security reviews your dedicated account and finds that funds were used for non-allowable expenses, you could be required to repay those amounts. Keeping organized records protects you from misunderstandings and demonstrates that you're fulfilling your fiduciary duty responsibly.
Managing a dedicated account alongside regular benefits requires careful tracking and organization. Purple offers accounts designed for representative payees with tools that help you categorize spending and maintain the records you need for Social Security reporting.